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significant contribution to the future debate through the institute on peace and security and through other academic and profit programs that you have. the more we can link up our university communities on some of these specific issues in support, for example, of the american university in kabul, looking for ways to do much more in terms of exchanges that can be partnered with the bush institute or other institutions, those are life lines. those make a tremendous difference in validating the work being done and lifting up examples. i think it's important to tell the story to our fellow americans about what has been accomplished, because there's a sense, you know, what did we really get for everything we did
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and how do we know it will last. well, we need to tell the tore to the first question. here is a lot of what we accomplished to compare where afghanistan was in 2001 with where they are today. and then to take it to the next level by, as laura said, talking about why this is still important for the united states. so i'm hoping that in the next year, because this upcoming year is the critical year, we will have a much greater awareness and a better connection among people who know what's at stake in afghanistan from either a moral perspective, a human rights strategic, strategic, economic, political, whichever way you enter into it, every one of those is at stake and to think of ways we could be creative to support the women
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and men who are trying to move afghanistan forward. we will certainly, the three of us, be deeply involved in making that case. but we need a virtual army now that the real army is leaving, we need a virtual army to help us make the case and to build that awareness here in the united states and around the world. [ applause ] >> well, thank you to you both, mrs. bush, secretary clinton. thank you for all you've done. thank you for all you will surely continue to do. thank you for being an extraordinary bipartisan face on an issue that has no partisanship.
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>> we're live on capitol hill for the hearing on development of virtual currencies. what current and potential uses will be. we'll hear how national security issues could be affected by those currencies. at this hearing held by the senate banking committee. we see the chairman of the committee, senator jeff merkel from oregon seated there. i want to read the story about another hearing yesterday said virtual currency bitcoin took a big step towards mainstream as federal authorities signaled their willingness to accept it as a legitimate payment alternative. that senate hearing monday afternoon was the clearest indication yet of the government's desire to grapple with consequences of virtual corners and recognition that bitcoin and other similar networks could become lasting and significant parts of the financial landscape. you can see that senate homeland
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security and government affairs hearing that happened yesterday at this hearing expected to get under way in a few minutes.
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i'm pleased to co-chair this hearing on the present and future impact of virtual currency. my friend senator merkel and i appreciate the work senator heller has done and senator kirk will be joining us as well. we're going to do this a little different because it's a joint subcommittee hearing i will chair the first panel and the senator will chair the second. the uses of virtual currencies have proliferated in recent
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years. my hope for this hearing is to educate the senate members and others and start the education of the public about virtual currencies, including the potential and drawbacks. i also hope to explore how regulators are keeping up with this technological innovation to protect consumers. i've got a full statement here but i actually have to acknowledge that i've been following this development of bit coins for the last two months. i would think i'm only starting to wrap my head around the potential upside, downside, regulatory issues, monetary policy issues, taxation issues, consumer protection issues that this innovation represents.
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rather than going through my whole thing, i'll point out to the witnesses that back in 1982 i had the opportunity to get engaged in a new industry at that point that was on the cutting edge of an industry called cyber telephones. all of the experts at that point thought it would take the world 30 years to develop out a wireless network. and at the end of that five years, about 30% of americans would use them. luckily for me the experts were wrong. and now these devices transform our lives. getting it right from all the regulatory, financial, consumer points around virtual currencies, bitcoin in particular, could pose as great if not greater challenge and
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opportunity. and what my hope is this will be the beginnings of an effort to come in with open minds to hear about the potential but to also hear about the important ramifications around monetary policy, around taxation. think about the notion with this 21 million bit coins that could be created. as we see acceptance, the fec has allowed political contributions to be made in bit coins. this is a development that's already in process. but if this becomes a standard currency or tool, it could radically and dramatically transform the role of central banks, monetary policy. it could transform -- it has
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enormous security concerns. so i am very, very interested about this hearing as a member of the intelligence committee. i'm concerned as well about the potential abuse of this development. but i think as we see now about somewhere between 10 to 12 million bit coins that have been mined and just the reactions yesterday from senator carper's hearing where i believe bit coins spiked at over $700 per unit, we're talking about a currency that is already been monetiz monetized. we as policymakers will have to catch up. i'm very much looking forward to this. i appreciate my colleague, particularly the senator's interest in this. with that i'll turn it to senator heller, back and forth with a couple of opening statements and i want to get to
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introducing the witnesses. >> i want to thank you for holding this subcommittee. i want to thank ranking member kirk and i'm happy we're having this joint committee. i think we need to have more of these. with that i'll keep my statement relatively brief. today we're here to learn about virtual currencies and crypto currencies. the most popular, of course, which it business coin. generations in nevada mined for gold and silver and copper, today they can mine for virtual currencies on their computer. while these virtual currencies are not widely accepted, the number of users continue to grow. we must recognize these decentralized digital payment systems. today i look forward to learning about the long-term viability and practicality of virtual currencies. i also want to learn how various regulators react with virtual currencies and which by their design are meant to be independent of any government.
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i will end with this note. internet is new frontier of innovation. i believe members of congress should recognize we often don't know what these new advancement will develop into. while we must ensure proper safeguards, it's my hope through hearings like this we can help maintain an environment that continues to promote new financial technologies and innovative growth. thank you again to my colleagues. i look forward to hearing all the testimony from my witnesses. thank you. >> senator. >> thank you. it's a pleasure to co-chair this gathering. i see by the full room the level of interest and enthusiasm in this topic. certainly this is a new technological strategy that has a tremendous number of implications. the wave of innovation reaching in the world of currency and money transmission. we've all heard about exciting developments such as mobile developments and companies, classic banking system payments.
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this generation of technology which we're talking about today takes things to a whole new level. with the creation of virtual currencies like bitcoin and more recently ripple, we're actually seeing payments trans acted entirely with trust. open source code and public transaction ledger listing every transaction virtual currencies are truly a completely different animal. some of the ways the last decade's innovation in silicon valley and silicon forest improved lives. i had to throw silicon forest in there because that's in oregon, developments in virtual currency have real potential to provide value to american citizens and businesses. lower transaction costs, more secure money transmission. these are significant qualities at the same time using this space unwatched and regulated will ensure pitfalls for users and law enforcement alike. we've had recent news about illicit activities, narcotics
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money laundering, rapid fluctuations in the market for bit coins. we have questions about consumer questions. there's certainly, therefore, a lot of issues about whether virtual currencies are ready for prime time. today's hearings will explore the current and future state of virtual currency, especially how it affects core services and businesses to make payments whereas a potential for innovation opportunity and where are the gaffes and weaknesses along the way. i want to note a recent article, portland businesses enter the world of digital currency. back in 2009 greg abbott, the owner of whiffy's fried pies was hanging out with tech enthusiasts by his food cart. he was discussing bitcoin. one of the folks hanging out, early investor offered $1,000 bit coins for one of his hand
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pies. he says i didn't say no. i got distracted and the individual walked off. that was a $250,000 mistake. silly me. based on yesterday's value that's a $700,000 mistake. that certainly would have been the most expensive pie in the history of human kind. this is absolutely fascinating. by the way, he did proceed to start accepting bit coins as a number of portland facilities have done using mobile app that converts from bitcoin to dollar and back and forth based on the most recent exchange rate. this is a functional, viable technology at this very moment. so with that, senator kirk. >> thank you. thank you for bringing us together on this bitcoin effort. i would say i've been worried about bitcoin some, because it's
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so complicated it could facilitate illegal activities or terrorist activities. >> thank you, senator kirk. i think that's obviously one of the focuses on the first panel. lets get to the witnesses, the real experts. first panel, just mentioned, will focus on the governmental side. the second panel will focus from advocates. it will be an interesting afternoon. we have miss jennifer shasky calvery. fin scecen. she managed a justice department program responsible for annual forfeiture of more than $1.5 billion in criminal assets in related programs to ensure those assets returned to victims and reinvested in law enforcement.
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she has also testified before congress on a wide range of issues including trans national organized crime, state, business incorporation practices. will probably break new boundaries as well. welcome. >> mr. david cotton, commissioner of banks for the commonwealth of massachusetts. he has served in that position since november 2010 seeing supervision of 2,000 banks and credit unions with assets in excess of $325 billion. mr. cotney is an active contributor to consumer protection efforts both in massachusetts and nationally. in 2013 he was elected as vice chairman of the board of directors of the conference of state bank supervisors on whose behalf he testifies here today. welcome mr. cotney. miss shasky, cavelry.
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>> i'm director of treasury p crime enforcement or fincen. i'm here to discuss the work doing at fincen for illicit actors to exploit u.s. financial system as technological advances such as u.s. currency create new ways to move money. recognizing the potential for abuse ofer merging new payment methods and understanding that the antimony laundering protections must keep pace with these advancements fincen began working with our partners several years ago to study the issue. here is what we learned. illicit actors might decide to use virtual currency for many of the same reasons as legitimate users but also more nefarious ones. specifically an illicit actor may choose to use virtual currency because it provides anonymity, is easy to navigate, may have low fees, accessible
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global with an internet connection, does not typically have transaction limits, generally secure and provides a loop holy from regulatory safeguards in most countries around the world. indeed the idea that illicit actors might exploit vulnerabilities of virtual money to launder money is not theoretical. liberty reserve engaged in a $6 billion money laundering operation. just recently, department of justice alleged silk road, largest contraband marketplace on the internet were required to pay in bit coins to avoid detection and facilitate laundering hundreds of make also of dollars. that being said, put it in perspective. recorded bitcoin transactions worth approximately $8 billion last year. by way of comparison in 2012 bank of america alone made $245 trillion in wire transfers. thus while a growing concern to date, virtual currencies have
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yet to overtake more traditional methods to move funds, whether for legitimate or criminal purposes. nonetheless, to address growing concerns, in july 2011 after a public comment period, fincen released two regulations which updates several definitions and provides accessibility to accommodate payment system innovation including virtual currencies under pre-existing regulatory framework. then last march fincen issued additional guidance to further clarify compliance obligations for virtual currency actors covered by our regulations. in short they were required to register with fincen, put aml controls in place and provide certain reports to fincen. it's in the best interest of virtual currency providers to comply with regulations. any financial institution could be exploited for money laundering purposes. what's important is for institutions to put controls in place to deal with those money
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laundering threats. at the same time being a good corporate citizen and complying with responsibilities is good for bottom line. every financial institution needs to be concerned about its reputation and show it's operating with transparency and integrity within the bounds of the law. legitimate customers will be drawn to a virtual currency or administrator or exchanger where they know their money is safe and they know the country has a reputation for integrity. banks will want to provide services to administrators or exchangers that show not only great innovation but also great integrity and transparency. the decision to bring virtual currency in our regulatory framework should be viewed as a positive development for the sector. it recognizes innovation virtual currencies provide and benefits they might offer society. several new payment methods in the financial sector have proven capacity to empower customers and expand access to financial services. we want such advances to continue. however, those institutions
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choose to act outside the law will be held accountability. fincen in its regulatory power to stop abuses of the u.s. financial system. we have proven our willingness to do that by using targeted financial measures the patriot stand ready to take adigszal regulatory actions as necessary to stop other abuses. as the financial intelligence unit for the united states, must stay current on how money is being laundered in the united states so we can share this expertise and service the corner stone of this country's mfl-cfc regime. we continue to deliver cutting edge analytical products from our many parter ins. the administration has made appropriate oversight a requirety and encouraged by the progress we have made thus far.
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thank you for inviting me to testify before you today. >> thank you so much. >> thank you. good afternoon. chairman warner and merkley. my name is david cotney and it is my pleasure to testify before you today on behalf of the conference supervisors. i thank you for holding this hearing today to address the risk of virtual currency. including payment protection system, national security, money laundering and other ill ligs sit activities. the potential benefits are also diverse. providing an out link to the unbanked and under-banked.
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state regulators have long-supervised money transmiters to protect consumers and preserve national security and law enforcement interests. state regulators are talking with industry and other regular lay toshs about evolving methods of moving funds. this includes virtual currencies and peer-to-peer transactions. state regulators believe that an open dialogue is key to accomplishing the goal of determining the appropriate level of oversight and supervision. emerging payment technologies are at their core of the electronic movement of other people's money. this is not unlike the activities of money transmitters for which the states have an established structure for
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regulation and oversighted. licensing is the foundation. state regulators examine money trarns mitters on an on going basis. ensuring is that it does not lose a customer's money. further, states actively examine requirements coordinating with finsen and the irs. >> after working with the brazil central bank, my division
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earlier this year found evidence of forgery and on going illegal condu condu conduct. cooperation has been a hallmark of state supervision. manifested in a uniformed licensing system for all states. originally codified in federal law back in 2008, the multi-wide licensing system has become an intragal part of state supervision for a viert of non-bank service providers. massachusetts and 14 other states currently use the licensing platform for money transmitters and 14 more will start using the system in the next year.
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i want to know csvs's support for 947 which enhances the safe act's prerkss. >> we look forward to continuing a collaborative approach. ensuring individuals and economies are well-se served. thank you. i look forward to answering any questions you may have. >> thank you both for your testimony. we'll put five minutes on the kwlok. in his opening statements, i'll try to wrap my head around this. we have the strength and the right balance since we're talking about here no government
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entity. the ability to set up these exchanges if we have too much of a regulatory burden, we can chase these exchanges off-shore and still leave americans unprotected. i guess my question, for both of the witnesses, we're talk about this as a currency. but are we determined that they're simply being an internet protocol. or is this a security. have we thought through their currency.
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have you consulted as you started to view your guidance? is there any kind of beginning of an international regime. >> thank you, senator. first, on the issue of currency, fincen is the regulator for antilaundering. and so we've never opined and still are not opining as to whether virtual currency is a real currency, a commodity as those questions are outside our purview. what we do recognize is that it exists through the u.s. financial system. and, as such, we need to protect that financial system from elicit actors.
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we did not need to take a position. but, in terms of have we consulted with other regulatory bodies here and the answers we have again, we spoke with sei, the secret service, dea, ice, fbic, occ, irs, the federal reserve, ncua -- >> and they all have sophisticated mean sns. >> yeah. >> we did consult from the consumer perspective. we've consulted with all of them as we can. this is developing an innovative arena and we were lucky to be able to cover it under pre-existing regulations.
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as we talked to our counter person, as well, with the last portion of your question, there is great interest by fellow regulators as they're trying to get their heads around what is this and what does it mean, our german counter parts, like us, and other coup tris, thus far, have been asking us what we see and financial aspect pass ports which is aml, standing setting bodies in an international community plans to take us this topic. >> in answer to your first question about the level of regulation, that's exactly what the states are trying to do with states and local regulators to make sure we have an appropriate level of oversight and supervisan

Politics Public Policy Today
CSPAN November 19, 2013 3:29pm-4:00pm EST

TOPIC FREQUENCY Us 6, U.s. 4, Kirk 4, United States 3, Bitcoin 3, Afghanistan 3, Massachusetts 3, Aml 2, Mr. Cotney 2, Oregon 2, Portland 2, Irs 2, Heller 2, Fincen 2, Unbanked 1, Parter Ins 1, The Financial Intelligence Unit 1, Fin Scecen 1, The American University 1, Oversighted 1
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